07 Jul Should You File Bankruptcy If You Have No Assets?

Protection of your assets is one of the most important reasons to file for bankruptcy. There are some people who say that if you don’t have anything, you don’t need to file for bankruptcy but that isn’t necessarily true. Even if you don’t have any assets now, filing a Chapter 7 or Chapter 13 can protect your future assets.

If you have debts you don’t pay, creditors can file a lawsuit to sue you. If they do, and you don’t have a defense, they will get a judgment against you. In the state of North Carolina where I live, judgments can survive up to twenty years. A creditor can keep coming back as long as the judgement survives, to see what you own, in hopes that one day you will have something to take. Some states allow wage garnishments.

Under state laws, creditors can sue you and then try to take your property, but most states have laws called “exemptions” that protect some (or all) of your property from your creditors. If your state laws protect all your property, then the creditor with a judgment walks away empty handed. At least they do, for the time being.

Even if you think all your property is exempt (protected) you might find that a judgment creditor has levied your bank accounts and you are cleaned out. You may not hear from the creditor for years, but as you pay down equity in your house or car, save up money, or inherit property, you will have that judgment looking over your shoulder ready to pounce.

Bankruptcy stops the clock on collection because all your debts are looked at on the day of filing your case. If you don’t have any assets over your exempt amount, there is nothing to sell in your case and you discharge your debts and get a fresh start from your creditors. If you acquire property in the future, your pre-bankruptcy creditors can’t reach it.

Of course, the decision to file or not file for bankruptcy should be made on a case by case basis. For instance, someone who is elderly, living on social security and never going to get any new assets might not need to file to protect assets, but they might chose to file to stop creditor harassment.

You should discuss whether or not filing for bankruptcy makes sense for you with an experienced attorney.

Concentrating in Consumer Bankruptcy Law since 1988;
Wake Forest Law School JD 1987
Law Office of Susanne M. Robicsek since 1993,
Law Clerk to Judge Rufus Reynolds, US Bankruptcy Judge for Middle District of NC; Burns Price & Arneke, PA, David Badger and Associates, PA.